Market crash: are we there yet ?

[kootenay]

Wind I would really like to hear your opinion on the markets outside the US. Most particularly up here in the GWN. We simply haven't seen the crash and burn in other than the stock markets last fall. Sure employment took a dip last fall but it is for the most part recovering. Low interest rates have fueled the real estate market way too much and I wish we would see at least a 25 basis point bump ASAP. I am concerned that there is this disconnect between our experience up here and the bursting bubble in the rest of the world. I think we need not stimulus but rather a shot of good old fashioned restraint.

[wind_magic]

More 1930's redux ...

US moves to place new duties on steel from China.

So let's play a little Market Crash guessing game, you ready ? Here's the question - how many hours (or days) will it take for China to announce it is going to escalate this by raising import duties on more U.S. products. Whoever gets the closest with the number of hours from 4pm December 30 2009 wins. Bonus points if you can guess which industries will be affected in the U.S., how much trade (in billions of $us) will be affected, and how many people the press estimates will lose their job as a result.

I think we'll get the chance to play this game a lot more in the coming months and years, it's like the 1930's all over again afterall!

Edit - Kootenay I didn't see your post, I will get to it a bit later.

[eherlihy]

Originally Posted by kootenay

Sure employment took a dip last fall but it is for the most part recovering.

Where do you live???? That is not the case in the northeastern United States, on planet earth.

According to the BLS; "In November, both the number of unemployed persons, at 15.4 million, and the unemployment rate, at 10.0 percent, edged down [However, if you look at the figures, this "edging down" is due to decrease in the size of the labor force - people are being removed from the labor force, thus edging the percentage of people without jobs down]... The number of people working part time for economic reasons (sometimes re-
ferred to as involuntary part-time workers) was little changed in November
at 9.2 million." However, "About 2.3 million persons were marginally attached to the labor force in November, an increase of 376,000 from a year earlier."

I have over 20 years experience in "high-tech" (hardware/software/networking/storage) sales and training. I was laid off over a year ago from a small startup, and have sent out hundreds of resumes (my best guess is over 400). To-date I have had three interviews with a hiring manager.

The UNemployment rate is not, as many people believe "defined as the percentage of those in the labor force who are unemployed." Rather it is the rate at which people are becoming unemployed. If I recall from economics (my major) in college, an individual is no longer counted toward the unemployment rate after they have been out of work for over six months.

The unemployment rate also does not count the number of former executives that are working at Home Depot or Walmart (underemployed) - just because they need to pay the mortgage. Today's Boston Globe had a feature on a former manager at Kronos (software) who is working three jobs, yet making 1/3 of his former $100K salary (3 $10K jobs).

I believe that I am no longer considered part of the unemployment rate, or the labor pool, despite the fact that I keep looking, and have broadened my search beyond my traditional field. I have been thrown out of the pool (and can't find my towel) because the pool is being drained!

[danjarch]

I'm going to say about 3 day before the Chinese react. I think the bigger question is how are they going to react. Do they announce tariffs or punish us in the bond market.

On a separate note, good luck Eherlihy, it's tough out there.

[edguy3]

eherlihy , you are absolutely right.
The Labor Force Participation Rate on U.S. Bureau of Labor Statistics site provides the most insightful data that I have seen. I've been using it to sanity check the spin doctors. It is not pretty picture. especially given a reduced immigration rate and many deferred retirements.

The Labor force size should also be available. But, I have yet to see stats on the under-employed. Iirc, you can get the actual definitions for the various rates on this site.

Best Wishes.

[TropicCat]

Windy's prediction of deflation did occur. It's now run it's course. I predicted hyper inflation, which hasn't occurred...yet. I will say that at this point look to the end of March through the end of May time frame for inflation, and interest rates to increase significantly.

Talking heads have proclaimed the Great Recession over. Well, I suppose you can say it's over as long as you overlook the small issue of 20% of the workforce without jobs. You might say that our new economy provides quite nicely for 110 to a 120 million workers. It's just unfortunate that we have 140 million in the work force.

Which brings me to a question or two. How long will unemployment benefits last for the out of work folks? One in eight Americans, and one in four children, are on food stamps. Some six million Americans, according to an article in The Times on Sunday, have said that food stamps were their only income. Can we afford this? When benefits do end, what happens then? Do we just call them lazy and let them live under bridges? Do we watch them starve?

While I'm asking questions, just how do we get into real positive GDP numbers if 20% of our workforce doesn't work? Just how does the new economic math calculate believable numbers?

Lastly, how long with the stock market remain disconnected from the real economy? Is there a major correction looming?

Food for thought.

[eherlihy]

Originally Posted by TropicCat

Which brings me to a question or two. How long will unemployment benefits last for the out of work folks? One in eight Americans, and one in four children, are on food stamps. Some six million Americans, according to an article in The Times on Sunday, have said that food stamps were their only income. Can we afford this? When benefits do end, what happens then? Do we just call them lazy and let them live under bridges? Do we watch them starve?

While I'm asking questions, just how do we get into real positive GDP numbers if 20% of our workforce doesn't work? Just how does the new economic math calculate believable numbers?

Lastly, how long with the stock market remain disconnected from the real economy? Is there a major correction looming?

Food for thought.

I agree with your prediction about hyper inflation, but not the timeline. What everyone seems to be missing is that we ARE experiencing inflation right now!

Salaried people are having to work longer hours for less pay. Everyone that I know with a job has had a pay cut. (My wife just realized that between her salary and variable compensation, she's been hit 50%!) While prices have not risen dramatically (yet!), if you are working more yet able to afford less, you are experiencing inflation.

Regarding your questions (Speaking from experience)
Massachusetts, which has one of the more generous Unemployment Insurance policies, normally offers 26 weeks of UI Benefits. (yes it is insurance - employer's premiums are raised when they fire or lay people off.) UI Benefits are based on a percentage of your prior wages. (In my case, it was less than 1/5. ) However, because of the current situation, there have been several extensions (both state and federal) which have increased the number of weeks that an individual could collect. My benefits were exhausted after 59 weeks.

In my case I'm not lazy, and I have been searching for work that will leverage my education, training and experience. (Thanks to the two SailNetters that have already contacted me.) Unfortunately, I am tied to the Boston / Providence area by my family. I have also looked into a career change. I paid for education and earned a certificate Marine Electronics, and will jump at any marine related opportunity, but this downturn is affecting all industries. In the meantime I have been doing handyman jobs for friends and family. They pay me what they think the job is worth... I have not yet decided to apply at Walmart or Home Depot, but I have started to think about it.

I considered UI as my "bailout package." However I took an 80% hit to my income, and I did not get a bonus (as AIG employees did). I did not travel to Washington DC in my private, or chartered, jet to beg for a loan. I have never filed for bankruptcy.

Instead I have sold assets (car, truck, and motorcycle), and have deferred all discretionary spending. When I worked I saved my money for times like these. I could sell investments to pay off my mortgage and outright buy the boat that I want, but it would be irresponsible for me to do so in my current situation.

Back to the bigger picture; I believe that we are seeing, not a re-distribution of wealth, but a consolidation of it. Large corporations that have been doing well, are doing better (look at profits, not stock price). Exxon/Mobil has had two pretty good years. Verizon and Comcast too. Oracle has had a nice run. I expect that both will do well this year too.

In my (former) industry, EMC, has been buying smaller companies like a tuna eating mackerel - increasing their access to new customers, and providing a barrier to competition (just wait for them to start integrating products and sales teams). Can anyone tell me how many other companies Bank of America has acquired? I know that it's a LOT.

With all of these industries consolidating, there are job redundancies (marketing/sales/management), which leads to "trimming." This consolidation also tends to stifle innovation within a specific market as well as competition. (No one in the storage industry wants to go head to head with EMC.)

Large corporations that did poorly, are being excused from accountability. AIG is still around, as are Fannie May, and GM. I watched the house committee Bernanke's defense of the AIG bailout was essentially; iIf AIG failed, the consequence to the [banking] industry would have been disaster. When asked to describe the disaster, he replied the failure of AIG.

I have to agree with Senator Bernie Sanders of Vermont; too big to fail is too big to exist. Having many and smaller businesses breeds innovation. The FTC used to police this... Does anyone remember when AT&T was broken up? In the '70s IBM was afraid of being broken up too, and started to lay the business foundation for when the FTC might order it to happen. The FTC's reasoning was to "dissipate the enormous market power of the current IBM Computer Manufacturing and marketing structure." After the danger passed, IBM had layoffs.

Outstanding debt to the Federal reserve bank is now about $2.2 trillion, a 132 percent increase from the start of 2008. Can the US afford this? - NO! The burden of the "stimulus package," "Cash for Clunkers," TARP, and even my extended UI will be placed on our children, and their children. Politicians have continued to kick the can down the road.

[kootenay]

Originally Posted by eherlihy

Where do you live???? That is not the case in the northeastern United States, on planet earth.

Actually if you had read the post I live in the Great white north. Or to those who are not fans of Bob and Doug Mackenzie, Canada. The Unemployment rate is about 8% and we dont measure it like you folks we actually measure it correctly. I have always figured that about 5% is endemic unemployment. In short the rate will never fall below that so we have about 3-4% who really want to work who cant find work. Not that they are looking that hard in my mind as an employer I find it hard to fill positions in Agriculture. Even as equipment operators.

BTW the USA is a unique situation today and your experiences do not nessasarily translate to the rest of the world. Your fiscal policy is a mess, your dollar is shaky as hell and will take a nose dive IMHO, you have interesting misconceptions about the quality of health care you receive and you simply consume more than you produce. If I was a bank and you were applying for a loan I wouldnt give it to you.

Sorry but the US simply is not on planet earth anymore from a reality perspective. You exist up in the clouds where hope is reality and wishes are gumdrops. And bills simply dont need to be paid. Take California they still owe BC 1.5 billion for electricity from the enron mess and are as a whole dead beat customers. We should turn off their power until they pay their bloody bill.

In any case I am concerned that the US move towards stimulus simply isnt the medicine we need but rather the opposite. Increase interest rates, let big banks fail, let the economy heal itself by culling out those businesses(like North American auto companies) who cant compete. We are simply prolonging the pain and probably going to make it worse in the long run.

But I really would still like to hear Wind's take on our overheated state up here.

[eherlihy]

Originally Posted by kootenay

Actually if you had read the post I live in the Great white north. Or to those who are not fans of Bob and Doug Mackenzie, Canada.

Sorry - I read your post, but not the thread (previous posts). Having now skimmed a few prior posts, I can see that you're from the land of Molson and Tim Horton's Donuts (together! ).

I don't know if I mentioned this in my earlier post; my wife is in the banking industry. Economists that she has talked to have indicated that the *real* US un/under-employment rate is closer to 20%

I agree that your economy is in better shape than ours. You also have a lower population to deal with!

[kootenay]

Originally Posted by eherlihy

Sorry - I read your post, but not the thread (previous posts). Having now skimmed a few prior posts, I can see that you're from the land of Molson and Tim Horton's Donuts (together! ).

I don't know if I mentioned this in my earlier post; my wife is in the banking industry. Economists that she has talked to have indicated that the *real* US un/under-employment rate is closer to 20%

I agree that your economy is in better shape than ours. You also have a lower population to deal with!

And a great health care system despite what the disinformation in the US discussion would have you believe. But if we dont see some tightening of interest rates soon I am concerned.